Bill Plans to Open a Do-It-Yourself Dog Bathing Center in a Storefront

question 155

Multiple Choice

Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $160,000. Bill expects the after-tax cash inflows to be $40,000 annually for seven years, after
Which he plans to scrap the equipment and retire to the beaches of Jamaica.
What is the project's payback period?

• A) 1.5 years
• B) 2.0 years
• C) 3.3 years
• D) 4.0 years
• E) 4.3 years

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Definitions:

Market Demand

The total demand for a product or service across all consumers in a market at a given price level and time.

Equilibrium Level

A condition in which the supply and demand in the market are equal, leading to stable prices.

Deadweight Loss

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved in a market.

Price Floor

A minimum price set by the government for certain goods and services, below which they cannot be sold, aimed at protecting producers.